Question

Jones bought 90% of the issued share capital of Williams on 1 January 20X2 for $400,000. The issued capital of Williams is $90,000 with retained profits of $110,000 of which $10,000 existed at the date of acquisition by Jones. All the assets in Williams’ statement of financial position were at their fair value at the date of acquisition.

How much the proportion of the net assets at acquisition? (NA@A)

What will be the value of goodwill arising on the acquisition of Williams in the Jones statement of financial position at 31 December 20X4?

Answer 1

a) portion of net assets on acquisition of 90% stake in williams:

Issued capital: $.90,000

Retained Earnings: $.10,000

(as on date of acquisition)

Total value of Net assets $.100,000

Portion of net assets $.90,000

(attributable to Jones) ($.100,000*90%)

b) value of goodwill on acquisition of Williams in Jones statement of financial position at 31.12.20X4

Cost of acquisition of Williams. $.400,000

Less: Value of net assets acquired. $.90,000

Value of Goodwill. $.310,000